January 23, 2002

CRONY CAPITALISM, AMERICAN STYLE

By Tom Plate

Enron, the American chaebol, takes the air our of American exceptionalism

(C) 2002 Asia Pacific Media Network

LOS ANGELES --- One recalls Washington's lambasting of Asia for "weak prudential regulation." The entire region was indicted for "lack of transparency" and "crony capitalism." Asian firms, it was charged, failed to project an honest picture of themselves to investors -- and listless or compromised Asian governments were part of the deal. Westerners breathed fire over South Korea's "corrupt chaebols" -- those all-too-cozy conglomerates that failed the West's "transparency" test by shading their true dealings from view.

Well, now it's the world's turn to lambaste America. For it has a sordid super-scandal: Enron. The dramatic collapse of this U.S.-style chaebol -- a gigantic Houston-based energy conglomerate -- looks to be the largest corporate bankruptcy in U.S. history. This "crony capitalism" scandal just might reach into the White House ("What did Bush administration know, and when did it first know it?" -- sound familiar?) and perhaps into the halls of Congress as well. Aided and abetted by the Arthur Andersen accounting firm, which apparently cooked Enron's books to hide from public view the underground sea of red ink that at the end of the day engulfed it, the collapse should cut into America's conscience across partisan lines. It will cost many honest investors a fortune and many hard-working Enron retirees peace of mind (as their 401(k) company stock shrinks in dollar value). In short, the United States has failed its own transparency test, big time.

This immoral tale should serve as a brake on the self-congratulatory and self-deceptive idea that America is morally a better place than anywhere else. Yes, America is exceptional, in many ways; but it is scarcely immune to the kind of corruption that plagues just about everyone else. Indeed, evaluated objectively, the United States has a mediocre integrity rating, at least as assessed by the authoritative Transparency International, the Berlin-based non-governmental organization.

On its most recent "Corruption Perceptions Index," a complex compilation of corruption levels worldwide, the United States once again failed to break into the top 10. It landed no better than slot 16, below not just squeaky-clean Scandinavian countries but also behind Australia, Hong Kong, New Zealand and Singapore, all of which were more highly ranked for controlling corruption.

To be sure, Asians are the first to acknowledge that its region is far from devoid of corporate and governmental corruption. The financial crisis of 1997-99 offered good reasons to believe poor-quality corporate information did worsen its crisis. The affected economies were hardly models of comportment. Nor were their governments always assiduous regulators of the private sector. Even so, Western investors who then blamed Asia for all their troubles had plenty of data about their prospective investments -- certainly enough to convince their clients to part with their money in the first place!

In hindsight, was there, categorically speaking, any more misrepresentation from Asia than from Enron? We in the West need to level with ourselves and cut down on the moral finger pointing. For by blaming others and excusing ourselves, we stand in the way of a more functional, realistic world community. Even today, nearly three years after the end of the Asian financial crisis, the capital-flow issue, a major cause of the Asian crisis, still has not been addressed. The United States is simply not interested. In part because those very "crony capitalist" allies of Democratic and Republican Party campaign-financing machines were making such bundles with their currency and equity speculation, the U.S. party line was that the financial crisis was Asia's fault. "There is a strong consensus," concluded Western lecturer-in-chief Michel Camdessus in 1999, "for making transparency the 'golden rule' of the new international financial system." Rapacious currency and equity speculation by the West had absolutely nothing to do with it. Oh, sure.

The story of the scandalous collapse of the Enron chaebol may never be fully told. Too many powerful people and interests -- Democrats as well as Republicans -- had their fingers in the action. But if nothing else, we should learn to be less condemnatory of others and more honest with ourselves. Only until we accept that we are all more or less in the same moral boat together, and that the United States is sometimes part of the problem, too, can America develop the leadership and moral respect necessary to rally attention to the world's systemic problems and begin to solve them. Let's hope Enron will give us that. For in the long run, moral bankruptcy is even more damaging to a society than the corporate kind.

Previous Columns:

The Medium is the Message (January 16, 2002)

The Importance of Being Optimistic (January 9, 2002)

(C) 2002 Asia Pacific Media Network